Freelancing platform Fiverr International (FVRR 3.74%) has taken its shareholders on one huge roundtrip since the company went public in 2019. The stock began trading at $26 per share in mid-2019 and sits right around that price as of this writing.
The most shocking part is that shares were once up nearly ten-fold, peaking at more than $300 per share at the height of the pandemic when its business saw a massive growth spurt.
But that was then, and this is now. Were Fiverr's sensational returns a fluke, or has the market's volatility since 2021 created an investment opportunity, a second chance to buy Fiverr at its earliest prices?
Here's what you need to know.
Fiverr's grown up now
It's important to understand the Fiverr of today is far different from the company that made its market debut more than four years ago. At its core, it's still a marketplace where people can buy and sell freelance services, ranging from copywriting to website design and computer programming.
It got its name from the notion that you could buy services for five dollars, but the business has evolved to go way upstream, offering a suite of services to enterprise customers.
Fiverr has also grown up financially, too. Today's version of Fiverr is generating three times as much revenue as it did at the time of its IPO, and the company is profitable. Free cash flow is positive, and analysts expect adjusted earnings-per-share (EPS) of $1.84 for 2023.
Data by YCharts.
You can see above that revenue growth has slowed since 2020 and 2021 (more on that below). However, Fiverr has at least retained that pandemic-fueled growth for now.
Could Fiverr soon pick up speed?
Let's talk about that slowing revenue growth. Lockdowns during COVID-19 put people in a position to make money freelancing since many industries were either closed down entirely or limited in their operations. Fiverr is one of the leading freelance platforms, along with Upwork, in an industry that's very fragmented and still largely offline. It benefited from this surge in freelancing interest as you can see below:
Data by YCharts.
The problem with a surge of growth like this is Fiverr had no way to maintain it as lockdowns ended, despite investors' expectations to the contrary. Revenue has still managed to climb, though at a much more modest single-digit pace in recent quarters. That said, the company did report a small acceleration in its year-over-year growth during the second quarter.
Will that continue? Analysts are optimistic with the consensus revenue growth estimates for the next three years calling for Fiverr to grow revenue 7% in 2023, 16% next year, and 19% in 2025.
Management believes there's a $247 billion addressable market in the U.S. So Fiverr's best years may still lie ahead of it as the company digests the pandemic bump and normalizes its growth trends.
Incoming earnings growth makes Fiverr a buy
Fiverr's management leaned into growth during the pandemic, but it has cut back on spending as growth slowed. Since the business hasn't lost revenue, it's become a more profitable company in the process. Cash flow has been positive, and GAAP net income has surged higher since bottoming in mid-2022.
Data by YCharts.
Given the analysts' consensus for $1.84 per share in adjusted earnings this year, shares trade at a forward P/E of just over 14, a multiple usually reserved for companies with weak growth prospects. But Fiverr's profits should surge higher as the company's revenue growth bounces back. Analysts believe Fiverr will earn $2.78 in 2025, further reducing its valuation to just 9 times that forward estimate.
Not only could the market push Fiverr's valuation higher as growth recovers, but the company could enjoy years of expansion due to its massive addressable market. The stock is back to IPO prices, but its long-term potential looks far better today.
